Strategist, entrepreneur and commentator Craig Coogan examines issues with his unique perspective. NOTE: The views expressed in this blog are of the author (Craig Coogan) alone. They do not represent any organization, client, or business that he may be associated with. You are welcome to comment below. Thank you for reading!

Thursday, August 13, 2015

Sharing the work

I’m pretty good at sharing. As kids we’re all taught to
share but that doesn’t always translate to adulthood. Thanks to technology the
sharing economy is one of the greatest growth areas in the economy. I think
that Uber is one of the best inventions ever. Uber (and Lyft) allows people to
request and drivers to provide rides via its smart phone application. It has
disrupted the traditional taxi and limousine services, causing protests, a slew
of legislation and the company has a nearly $50 billion valuation. For me it’s an absolute life saver living in
a city like Boston where people who don’t live here rave about how easy it is
to walk around.

In my recent travels the difference between traditional taxi
services and Uber is stark. Arriving in Los Angeles and getting myself from the
airport into downtown as a default I opened Uber and requested a car via the
least expensive service – Uber X. No cars available because the City Council of
Los Angeles has banned the ride sharing service at the Uber X level. So I went
to the taxi stand and waited 15 minutes for a taxi to come. $70 dollars. On my
next trip I opted to request an Uber at a more expensive level. 5 minutes later
the driver arrived, $60 dollars and he had a bottle of water for me in his
leather apportioned high end vehicle. On my way back to the airport using the
Uber X service the cost was $25 and it was less than a 3 minute wait to be
picked up.

In the college town of Cambridge which has a dearth of
parking spaces and getting around from point a to point b is a particular
challenge, Uber is banned from picking up passengers, though you can be dropped
off. On August 4 cabbies went on strike in the city to protest services like Uber and Lyft. There are a number of
issues around the strike – inconsistent regulations and concerns about
background checks and safety are the most visible and passionate. They’re also
the most legitimate. The answer is applying the same rules across the board –
and the sharing economy is a great opportunity to minimize the regulatory
process.

A more fundamental objection to the services by the taxi’s
is economic. Medallions are issued by cities giving taxi’s the right to pick up
and drop off customers. There’s a limited number so there’s an inherent value
of supply and demand. In cities like New York and Boston medallions can be
passed down generation to generation and many drivers count on the value of the
license for their retirement. Services like Uber and Lyft have disrupted that –
to the point that medallions have lost a significant part of their value. In New York a medallion that went for $1
million is now worth half of that, and in Boston not one medallion has changed
hands in 2015, indicating a crater in valuation.

The Democrats have seized upon the rift as a political issue.
Candidate Hillary Clinton outlined her economic policy last month characterizing “the on-demand economy as
committing wage theft.” Companies like Uber and Lyft classify their drivers as
freelancers – not as employees, saving on payroll taxes and a range of other
costs. The drivers choose when to work, where to drive, how long to drive, etc.
California’s Labor Commission ruled recently that Uber drivers are actually employees since the company controls the workers
ability to earn a living, determines their skill set and appropriateness for
the job, etc. It’s a determination that could upend the economic model of not
just Uber, but the entire shared economy.

James Surowiecki in The New Yorker makes an excellent point: “The real problem here is that Uber drivers don’t
quite fit into either of the traditional categories. Declaring them independent
contractors or employees means forcing a square peg into one of two round
holes. We’d do better to create a third legal category of workers, who would be
subject to certain regulations, and whose employers would be responsible for
some costs but not others.”

The shared economy is a hybrid at its core – it takes the public’s demand for
a service (room for rent, car ride, repair , etc.) and matches it with an
individual who’s willing to provide the service outside of a significant
corporate structure. Creating a hybrid work and compensation model that
combines employee and independent contractor statuses and rules makes a lot of
sense.